Telefonica de Espana SA is to integrate all its international subsidiaries within a single network, to be known as the Pan-American Network, with the aim of saving costs both to the carrier and to users. Connections between Telefonica’s subsidiaries in Argentina, Chile, Peru, Venezuela, Colombia, Puerto Rico and Spain will all use this network, which is due to be operational this year and will be developed in gradual phases. A first stage will focus on services for its largest clients, mainly multinational companies, and international traffic. A later stage will allow for the use of credit cards when telephoning in any of the aforementioned countries. Meantime Telefonica Internacional, 76.22% owned by Telefonica de Espana, continues to build on its empire in South America, where it has made life particularly difficult for the North American companies.
Modus operandi
Arguably Spain’s number one multinational, and the only Spanish company widely followed on major international stock exchanges, it is now present in a total of nine countries and reported profit of $208.4m on record $2,055.5m turnover in 1994. The policy it has favoured in South America, as state telecommunications companies have been privatised, has been to bid for tenders together with local partners, partners that have often been the state itself. In this way Telefonica Internacional, while maintaining a high degree of control over the management of its projects, has minimised the financial risks and investment demands involved, in keeping with its particular stake (clear cases in point are Argentina, Chile, Puerto Rico and Peru). Telefonica Internacional’s industrial modus operandi has been to build on the foundations of telephone lines and public telephones wherever possible, and this has meant developing other activities, such as cable television, cellular telephony and Yellow Pages, for example. Telefonica Internacional recently presented its documentation to join the shortlist of eight operators who will bid for the telecommunications company Entel Bolivia. Bolivia, with a population of 6.7m, currently has just four telephones for every 100 inhabitants. Telefonica Internacional’s competitors here will be France Telecom, Stet SpA, la Companhia Portuguesa Radio Marconi SA, Korea Telecom Ltd and the North Americans MCI Communications Corp, Bell Atlantic Corp and Sprint Corp. Telefonica Internacional has already secured a Bolivian partner, which has connections with the mining industry and television.
By Simon Davis
In the particular case of Bolivia, the company chosen to operate the service will pay a sum to use the system, but will only gain ownership once it has reached the objectives agreed with the Bolivian Government. It is not thought, however, that such an arrangement will pose any problem. Telefonica Internacional is also currently interested in two more countries in South and Central America: its progress in Brazil is being held up by the fact that the Brazilian Government cannot privatise the operators Embratel and Telebras without changing the constitution, although President Henrique Cardoso has frequently expressed his interest in Telefonica Internacional and Compania de Telecomunicaciones de Chile SA – in which Telefonica Internacional has a 43.6% stake, participating in the privatisation process. In Mexico, Telefonica Internacional is in the process of building up a suitable group prior to privatisation there. Meanwhile, in Chile, Telefonica Internacional – through its participation in Telecom de Chile – is preparing an ambitious multimedia project, which will require an investment of some $140m over the period 1995-96. A syndicate of European banks has already agreed to lend Compania de Telecomunicaciones de Chile some $275m. The first step will be to lay 4,400 miles of fibre optic and conventional cable to connect 600,000 homes. This network will initially be used for conventional telephony. Later, and depending on the results of a pilot scheme to be run from September in two areas of Santiago, a b
asic cable television package will be introduced using this network. Telecom de Chile plans to make the offering increasingly versatile, so that subscribers will have the chance to pay an additional fee and receive extra services. If all goes as planned, services such as video-on-demand, home shopping, home banking and news services will all become available. Aside from this project, which will be in competition with the services to be offered by BellSouth Corp, Telecom de Chile also controls part of the long dist ance call market. A law has stipulated that, prior to liberalisation, it can handle 20% of long distance calls outside Chile and 35% of those within the country. Telecom de Chile has designed an aggressive price policy (rates are independent of the distance of the call), setting its sights on 40% of the long distance market, once liberalisation arrives.
Cubans
Elsewhere in the region, Telefonica has also reached an agreement, whereby it may operate in the American long-distance call market from its subsidiary in Puerto Rico, Telefonica Larga Distanca. This project will involve an investment of only $2m, mainly in marketing, since access to this market is to be gained through a franchise. Telefonica Internacional, 76.22% owned by Telefonica de Espana SA, has held a majority 79% stake in Telefonica Larga Distanca since 1992, while 19% is in the hands of the US colony of Puerto Rico and 2% is shared among company employees. Telefonica Larga Distanca made a profit of $8m in 1994. Telefonica Larga Distanca also has a licence to handle direct calls to and from Cuba. Users in Cuba can call the US, among other countries, and vice-versa. The importance of this agreement can be appreciated, if account is taken of the large number of Cubans living in the US, El Pais notes.
